Feds: 5 execs embezzled $20 million from Starkey Laboratories

Federal prosecutors say five executives spent a decade embezzling money from the Twin Cities company that is America's biggest hearing aid maker, stealing $20 million from Starkey Laboratories.

The U.S. Attorney for Minnesota, Andrew Luger, announced the indictment Tuesday, saying the suspects used the money they stole to buy a car and a condo among other purchases.

According to the indictment, the five men created a network of bogus companies, awarded themselves restricted stock, and otherwise embezzled money from 2006 through September of last year. Two of the defendants worked for other companies that do business with Starkey.

The indicted executives include Jerry Ruzicka, the former president of Starkey Hearing Technologies, and Scott Nelson, the president of Sonion, a company that supplied hearing aid parts to Starkey.

Prosecutors say those two created a sham company called Archer Consulting, which received "commission" payments and "consulting fees" of up to $75,000 a month. The indictment says Archer Consulting collected a total of more than $7.6 million by last year.

Allegedly spent on taxes, Jaguar, condo

Luger provided examples of how the executives spent the money they're accused of stealing from Starkey.

He says Ruzicka used $200,000 he embezzled from Starkey to pay his federal and state income taxes in 2014. Ruzicka is also accused of having a car that Starkey purchased – a $119,000 2011 Jaguar – transferred to his name.

Nelson, the president of the company that supplied parts, allegedly spent $200,000 of embezzled money to buy a condo "so that he could carry on a clandestine personal relationship with a Starkey employee," Luger's office says.

Statement from Starkey

Starkey Hearing Technologies released an email statement saying in part:

“To say that we’re shocked by the betrayal and breach of trust described in today’s federal grand jury indictments would be an understatement. They describe a web of criminal activity and concealment among former top executives−who used forged signatures, fake invoices, fictitious vendors and falsified pay records to steal from the company and its founder. That description is in marked contrast to our long-held values and those of our separate foundation, the mission of which is to provide free hearing aids and the priceless gift of hearing to some of the world’s poorest people."

Brandon Sawalich, a vice president at Starkey Hearing Technologies who ran unsuccessfully for the post in 2009, says he has a business background that should please party delegates. But MPR raises the question of whether grass-roots activists committed to some key conservative values will rally around him.